The Economic Imaginationhttp://blogs.forbes.com/artcarden
Using economics to understand the world.Tue, 27 Jan 2015 16:38:00 +0000en-UShourly1http://wordpress.org/?v=3.9.2Price Caps Leave Blizzard Riders Out In The Coldhttp://www.forbes.com/sites/artcarden/2015/01/26/price-caps-leave-blizzard-riders-out-in-the-cold/
http://www.forbes.com/sites/artcarden/2015/01/26/price-caps-leave-blizzard-riders-out-in-the-cold/#commentsMon, 26 Jan 2015 23:36:00 +0000http://blogs.forbes.com/artcarden/?p=1999This just in: people still cannot repeal the laws of supply and demand.

Ride-sharing companies are bowing to regulatory pressure to limit price increases during disasters. This means some people might be left out in the cold as price controls reduce the number of rides supplied and raise the number of rides demanded. In the name of “helping” people, governments are creating shortages.

It isn’t all bad as prices will be allowed to rise: Slate reports that Uber and Lyft will be able to raise prices in response to changing market conditions, but Lyft’s “Prime Time” pricing means prices will not more than double and Uber’s “surges in Boston will be capped at 2.9 times the normal fare and in New York, New Jersey, and Connecticut at 2.8 times the normal fare.” If the market price is below these caps, then the caps are non-binding and they should not affect the number of rides offered and bought.

If the market price for an Uber ride is more than 2.8 times the normal fare in New York, then there’s a problem. Economists have said before that rising prices are like a signal flare that tells people to move scarce resources toward the areas in which the prices are rising. Price controls mean a lot of people don’t get the message.

Consider what might happen if prices were allowed to fluctuate freely. There are lots of people living in unaffected areas who have four-wheel drive vehicles. There are probably a lot of potential drivers within a few hours of the affected area. Rising prices would probably draw some of them into New York and Boston where they could earn extra money getting people to safety. If prices are kept below their market-clearing level (or if special licenses are needed to offer rides for hire), a lot of people will just stay home.

Last year, winter weather turned Birmingham into a tangled mess resembling a post-apocalyptic wasteland. Disasters can bring out the best in people, and it was really encouraging to see people going out of their way to help people who were stranded. The kindness of strangers has its limits, however, and I can’t help but wonder how much more effective relief efforts would have been had we been able to appeal not only to strangers’ kindness, but also their self-interest.

It is tempting to say shortages are worth it if it means protecting people from price gougers. This is cold comfort (literally) for people stranded without a ride. The comfort goes away, though, when we consider two additional effects of the controls. First, laws against price-gouging don’t change the fact that people are willing to pay a lot for a ride, but they change the way people pay. They can “pay” for a ride with cash, by waiting, or with some combination of the two. Limiting people’s ability to pay with cash means they will pay by waiting longer or by trying to find other ways to get around.

If I value my time at $10 an hour, for example, and I am only allowed to pay $100 for a ride for which I would gladly pay $150, I might pay for the ride with $100 in cash and five hours of waiting around. Those five hours are wasted time, and I am no better off than I would have been had I been allowed to pay $150.

Second, prosecuting price gougers diverts attention from dealing with the destruction caused by the storm. Is fielding complaints about “price gougers” and then prosecuting them really the best use of municipal resources?

I’ll admit I was tempted for a few minutes to write a clickbait headline like “Do Regulators Want New Yorkers to Freeze?” Headlines like that are absurd because the answer is an obvious “no.” The controls are probably in place because the regulators think they are doing riders a favor. As I tell my students, meaning well is not the same as doing good, and when we impose price controls after disasters, we just make things worse.

]]>http://www.forbes.com/sites/artcarden/2015/01/26/price-caps-leave-blizzard-riders-out-in-the-cold/feed/3Baumol and Kirzner Should Get the Economics Nobelhttp://www.forbes.com/sites/artcarden/2014/10/08/baumol-and-kirzner-should-get-the-economics-nobel-prize/
http://www.forbes.com/sites/artcarden/2014/10/08/baumol-and-kirzner-should-get-the-economics-nobel-prize/#commentsWed, 08 Oct 2014 18:47:00 +0000http://blogs.forbes.com/artcarden/?p=1990On September 25, Thomson Reuters offered Nobel Prize forecasts. For economics, they predicted that the prize might go to Harvard’s Philippe Aghion and Brown’s Peter Howitt “For contributions to Schumpeterian growth theory,” Stanford’s Mark Granovetter “For his pioneering research in economic sociology,” or New York University’s William J. Baumol and Israel J. Kirzner “For their advancement of the study of entrepreneurism.” Peter J. Boettke discusses the predictions here.

The Prize will be announced on October 13. I would love to see the Prize go to the economists in the Big Apple, Baumol and Kirzner. At Marginal Revolution, Tyler Cowen suggests that Baumol might share the prize with William G. Bowen for their “work on the cost-disease,” and a lot of economists have long considered Baumol Nobel-worthy; this About.com article points out that Baumol “would be a deserving and uncontroversial award winner”… of the 2003 Nobel.

Baumol has done many, many things (including co-author the textbook from which I studied principles of macroeconomics in Spring 1998), and some of his most important work considers the role of entrepreneurs in an economy. As he notes in his 1968 paper “Entrepreneurship in Economic Theory,” the firm without the entrepeneur is Hamlet without the prince.

This is where Kirzner shines. Kirzner answered a perplexing question in economic theory–how does coordination emerge from discoordination–by explaining “the market” as an ongoing process in which entrepreneurs are constantly adjusting their bids and offers to new information and expectations.

Entrepreneurs, successful and unsuccessful alike, confront the undiscovered country that is social reality and, through their successes and failures, guide the rest of us through it. As Mark Casson puts it in the Concise Encyclopedia of Economics, entrepreneurship involves the exercise of judgment, a quality that is unnecessary if everyone has perfect information. With their emphasis on the entrepreneur’s role in economic theory, Baumol and Kirzner fill important gaps in our understanding of how markets work.

Peter J. Boettke, who is with Frederic Sautet an editor of The Collected Works of Israel M. Kirzner, first explained why Kirzner should win a Nobel back in 2005. Boettke notes that Joan Robinson, a Cambridge University economist who was considered by many to be a Nobel-caliber economist even though she didn’t win the prize, pointed out that neoclassical theories of price adjustment in equilibrium beg the question of how coordination takes place. As Boettke argued nine years ago, “(t)he entrepreneur is the prime mover in the economic system” who notices profit opportunities before others. In acting to take advantage of these profit opportunities, the entrepreneur more closely aligns the structure of production with the economy’s underlying pattern of tastes, available resources, and technological possibilities.

Markets allow us to deploy others’ knowledge for our own purposes; this is one of the implications of 1974 Nobel laureate Friedrich Hayek’s classic essay “The Use of Knowledge in Society.” Baumol and Kirzner, through their work on entrepreneurship, show that the invisible hand of the market is more than a deus ex machina that generates coordination.

Boettke puts it this way: “…without the sort of explanation that Kirzner provides the entire enterprise of neoclassical equilibrium is little more than a leap of faith. We could simply embrace this conclusion–which is one way to interpret what Joan Robinson did.” “Or,” he continues, “we could realize that the defense of the free market system is intimately tied to the exposition of hte systematic forces of the market” that “enable individuals to realize the gains from trade, …. to utilize scarce resources in a cost effective manner, and to continually pursue new opportunities.”

Though there is vigorous debate about how well they do it and the extent to which government correction is needed, economists left, right, and center know that at the end of the day, markets coordinate action and generate order. Baumol and Kirzner deserve the Nobel Prize for helping us understand how.

Note: some of the links in this article are to resources produced by the Liberty Fund. I guest blog for them at EconLog and am compensated for it.

]]>http://www.forbes.com/sites/artcarden/2014/10/08/baumol-and-kirzner-should-get-the-economics-nobel-prize/feed/1An Open Letter to Birmingham’s City Council on Uberhttp://www.forbes.com/sites/artcarden/2014/07/22/an-open-letter-to-birminghams-city-council-on-uber/
http://www.forbes.com/sites/artcarden/2014/07/22/an-open-letter-to-birminghams-city-council-on-uber/#commentsTue, 22 Jul 2014 12:54:00 +0000http://blogs.forbes.com/artcarden/?p=1985Dear City Council,

Last night, I received an email from Uber saying that you will effectively decide their fate during this morning’s meeting. You will essentially decide whether you wish to embrace the 21st century or instead shackle innovators like Uber and Lyft. These companies have addressed your concerns about safety because first and foremost they have valuable brand names to protect. Uber’s rating system, for example, provides a degree of transparency that is currently lacking in the Birmingham transportation market.

It would be a mistake to block Uber’s products because of concerns that a bad apple or two might slip through their screening process. I readily acknowledge this possibility, but even if it happens we will be a safer city on net. There is some evidence to suggest that people who might otherwise drink and drive are opting to use Uber instead. It is too early to tell how large the effect is, but I would wager that by the time we have enough data for a systematic analysis, we will see that ride sharing companies like Uber and Lyft mean fewer drunk drivers and, therefore, safer streets.

Blocking Uber is also very bad economic development strategy. There is nothing magical about ride-sharing services per se, but the vote on Uber regulations is in a sense a referendum on whether Birmingham wishes to welcome or resist innovation. Instead of pursuing a dubious strategy like a domed stadium, Birmingham leaders should make way for innovators.

Restricting Uber will make it harder and more expensive to get around in Birmingham. This might benefit some special interests, but on net we will be worse off. If the concern is that taxi drivers and Uber drivers will be playing by different rules, then the best way to respond is to relax restrictions on taxi drivers. I recently explained the case for Uber in the pages of the Birmingham Business Journal” here, and in this episode of the popular EconTalk podcast, economists Russell Roberts and Michael Munger discuss Uber, Lyft, and the “sharing economy” writ large.

I appreciate your concern for the safety of the people who live in the Birmingham area, but there are a lot of reasons to think services like Uber and Lyft will make the city a better place to live, work, and play. I encourage you to make the right decision and welcome innovators to Birmingham.

Disclosure: I am a guest blogger for EconLog, published by the Library of Economics and Liberty, which also publishes EconTalk.

]]>http://www.forbes.com/sites/artcarden/2014/07/22/an-open-letter-to-birminghams-city-council-on-uber/feed/4Should Your City Run More Buses or Build Light Rail? Cato’s O’Toole Says More Buseshttp://www.forbes.com/sites/artcarden/2014/06/27/should-your-city-run-more-buses-or-build-light-rail-catos-otoole-says-more-buses/
http://www.forbes.com/sites/artcarden/2014/06/27/should-your-city-run-more-buses-or-build-light-rail-catos-otoole-says-more-buses/#commentsFri, 27 Jun 2014 15:49:00 +0000http://blogs.forbes.com/artcarden/?p=1974If your city doesn’t have a light rail system, someone in town probably wants to build one. If your city already has a light rail system, someone in town probably wants to expand it. According to a June 3 Policy Analysis by the Cato Institute’s Randal O’Toole, this would be an expensive mistake (Disclosure: I have been compensated for reviewing books for Cato’s journal Regulation). If a metro area is going to have a government-operated system of mass transit, expanding bus service would be a cheaper and superior option to expanding rail service.

It is far cheaper and more effective, O’Toole writes, for cities to expand bus service and use “high-occupancy vehicle or high-occupancy toll lanes” that “would allow buses to avoid congestion during even the busiest times of day.”

O’Toole notes that operating at peak capacity, “high-capacity rail…can move more people than cars, but low-capacity rail cannot.” While this might seem to suggest that high-capacity rail is a good idea, O’Toole goes on to argue that “buses running at capacity can outperform all forms of rail transit.”

O’Toole also lists several several advantages buses have over rail. First, buses can share infrastructure with cars and trucks, so bus service expansion would have a substantial cost advantage over building new rail lines. Second, buses are more flexible than rail and can be redeployed along different routes depending on shifting patterns of development and demand. It is expensive to alter a rail line to accommodate new patterns of development. It is much cheaper to alter a bus line.

O’Toole points out one of the major problems with rail (and infrastructure spending in general) that helps explain why rail is so popular even though it is so expensive. Rail stations and rails give politicians an opportunity to show off something shiny, sleek, and new. They help politicians convince voters that they have really done something.

Unfortunately, politicians’ incentives are to spend a lot of money up front, “bask in glory when the projects are open for business,” and then leave maintenance under-funded. Consider: you get a lot more political capital by cutting a ribbon at the shiny new subway station or railway platform than you would get from replacing worn-out brakes on existing trains, filling pot holes, or adding new buses to an already-existing service. We need to take this into account when we we’re asking whether rail transit is a good or bad idea.

If governments are going to operate transit services, O’Toole shows that buses are preferable to rail. Here is an even more radical proposal: let’s price road access or even turn roads into private property so that people have to better account for the costs of using roads at different times of day. Currently, people pay that price by sitting in stalled traffic or by changing their commuting patterns (I shifted my workday forward, for example, so I can avoid rush-hour traffic). This represents a substantial social waste that could instead be turned into shorter commute times and revenue by pricing highway access.

Today’s technology would make this much easier. First, services like E-Z Pass facilitate more efficient toll collection. In-car sensors or smartphone apps could track cars in real time and bill drivers accordingly. I might have to pay a monthly bill for road use the same way I pay for electricity, garbage disposal, and cell phone service. If you balk at the idea of private roads, consider that it might not be such a crazy idea. The economist Daniel Klein and the historian John Majewski explain how private turnpikes and toll roads evolved in the nineteenth century. It isn’t crazy to think it might work again in the twenty-first.

There are reasons to think people can provide transit services without the government’s help. If governments are going to operate transit services, buses are a much better deal than rail.

]]>http://www.forbes.com/sites/artcarden/2014/06/27/should-your-city-run-more-buses-or-build-light-rail-catos-otoole-says-more-buses/feed/0Natural Disasters Still Aren’t Good for the Economyhttp://www.forbes.com/sites/artcarden/2014/05/08/natural-disasters-still-arent-good-for-the-economy/
http://www.forbes.com/sites/artcarden/2014/05/08/natural-disasters-still-arent-good-for-the-economy/#commentsThu, 08 May 2014 19:24:00 +0000http://blogs.forbes.com/artcarden/?p=1958Tornado season is in full swing, and late April saw big storm systems that did serious damage in parts of Arkansas, Mississippi, and Alabama. Hurricane Season is but a few months away. Just as every year brings weather disasters to some places, every year also brings stories claiming that disasters are good for the economy (here’s a 2011 example from the New York Times). As I have written here before, though, stories like these make an elementary mistake by focusing on the new bursts of economic activity while ignoring the alternative uses of those resources. This is a point that goes all the way back to Frederic Bastiat’s classic essay “What is Seen, and What is Not Seen.” The logic is simple: the resources we have to use rebuilding a house that was destroyed by a tornado are not being used to build something new. Disasters leave the world worse off by the number of houses, businesses, and other things that get destroyed.

Our friends at NowSourcing, Inc. were kind enough to get Best-Accounting-Degrees.net to sponsor this handy infographic. Read on to learn how what you don’t know about the Broken Window Fallacy might hurt you.

Robert Shattuck asks whether Congress is dysfunctional, but I wonder when it was “functional.” As David Friedman might ask, is political conflict a bug of the system, or is it a feature?

Question #2: Do you favor term limits, and will you commit to limiting yourself?

There are two questions to ask: First, “how is this commitment credible?” Second, “are term limits desirable?” It isn’t at all clear that term limits would lead to better policy because of the incentives congresspeople would face in their final term.

Question #3: Global warming: is it real? Why or why not?

This is a question about climate science, not necessarily something Congresspeople will have power over.

At the same time, Paul DeMarco makes a good point about the use of fears about climate change to promote a regulatory agenda that may not actually fix anything.

This, I think, is an ideological litmus test rather than a public policy question.

Question #4: Obamacare: How do you “undo, revamp, or tweak this unpopular law?”

Health care is really tough because people assume (incorrectly) that what we have is a free market for health care. So far, no one has said anything about rolling back preferential tax treatment for health coverage.

I’m all for free markets in health care, but how do we get there?

Question #5: “Would you ever vote for a budget that’s not balanced?”

That’s an interesting question as there are at least plausible cases for government deficits. That said, Buchanan and Wagner’s 1977 Democracy in Deficit is a monumental and monumentally-under-appreciated contribution. Here’s the PDF, for $0. What works in a model might not work in the real world, and as Buchanan and Wagner point out, there will be almost overwhelming pressure for deficits.

]]>http://www.forbes.com/sites/artcarden/2014/03/31/alabamas-6th-congressional-district-gop-live-blog/feed/0Are YOU Konnected? An Exclusive Interview With Chimera CEO John P. Lunder, IVhttp://www.forbes.com/sites/artcarden/2014/02/14/are-you-konnected-an-exclusive-interview-with-chimera-ceo-john-p-lunder-iv/
http://www.forbes.com/sites/artcarden/2014/02/14/are-you-konnected-an-exclusive-interview-with-chimera-ceo-john-p-lunder-iv/#commentsFri, 14 Feb 2014 14:47:00 +0000http://blogs.forbes.com/artcarden/?p=1905The Kronies is a project of Generation Opportunity. Answers to Mr. Lunder’s questions were composed by the creative team at Emergent Order, headed by John Papola.

Is it too early to think about the holidays? If consumer spending is what drives economic growth, then the answer is an obvious “no,” and if you’re wondering what to get your kids for Christmas this year, it’s pretty clear what the must-have toys of 2014 are going to be: the Kronies.

Made by Chimera Incorporated, Kronies represent an innovative breakthrough in the toy market. Whereas previous generations of action figures have focused on “make-believe” worlds (GI Joe, Rescue Heroes, Thomas the Train) where risk and reward are purely fictional, The Kronies introduce kids to where the real action is: K Street in Washington, DC. Forbes.com is pleased to offer this exclusive interview with Chimera Incorporated CEO John P. Lunder, IV.

First, let’s talk about the toys. As a parent of three small children, I’m a little jaded on “educational” toys that are no fun and other toys that just offer mindless action. With The Kronies, though, you’ve created a line of toys that help teach kids about the importance of being “Konnected.” The toys look like big fun with a big message. Kaptain Korn, for example, has twin messages about environmental stewardship and supporting the American heartland. Tell us about those messages.

John P. Lunder IV: Kaptain Korn is a great example of what can be accomplished when you plug in to the power of the G-Force. Is corn-based ethanol the worst possible fuel source? Sure. Does it contribute to global hunger, political instability, and even violence? Perhaps. Would anyone actually choose to use corn-syrup over sugar if it weren’t for the tariffs and subsidies? Of course not!. But a total lack of merit and zero market demand is exactly the kind of challenge Kaptain Korn is hungry to overcome. And that’s why he needs to stay konnected to the G-force.

Let’s be honest. Networking is the American Way. If you want to get things done, it’s all about who you know in Washington. That’s where the power is. And if we want to raise a generation of kids who appreciate the power of the G-Force, we’ve got to create toys that re-educate them about how to get ahead. The old way was to create some product or service that people think they want—blah, blah—but the progressive way is to find experts who know what people actually want. Then we give the experts all the money and let them do their thing, all for the greater good. Only the government has the kind of money (or credit) to make America great again.

If companies like Solyndra can grab a chunk of change while saving the world, what’s not to love? Now that’s progress! …Well, maybe not in the case of Solyndra, but you get my point.

And Parts & Labor: they’re looking out not only for American workers but for foreign workers who might be exploited if we were to trade with them freely, right?

John P. Lunder IV: We all know that free trade improves the lives of workers in other countries, while providing Americans with cheaper goods and services. But who knows, the whole world might end up looking like Detroit (the new bad Detroit, not the good old Detroit). And it’s our responsibility at Chimera to protect American jobs, shield foreign workers and encourage the American way of life in America. That’s a win-win for the unions and the auto manufacturers. It’s not a huge deal that the American people will pay more, or have less access to, goods and services.

Tell us about Chimera. It’s an iconic firm in some circles, but a lot of people don’t really know that much about it.

John P. Lunder IV: Wow, where to begin. Our company has such a rich history. My great, great, great grandfather and “Admiral” Ignatius Hornswoggle established the Chimera Railroad Corporation with a quid pro quo agreement drafted in the East Sitting Room of the White House on February 4, 1887. Within a decade, Chimera had acquired Mandatory Oil, Bank of the Potomac, Accidental Life Insurance, and Circus Publications. Our conglomerated companies work in 15 countries. And we connect with leaders in each and every one.

You yourself are a bit of an elusive character. How did you end up in your current position? It’s the classic American riches-to-riches story, right?

John P. Lunder IV: Well as we like to say around the Lunder Castle, “Humility is in our DNA but visibility doesn’t pay.” I have always known how to speak truth to power, even with a silver spoon in my mouth! And at Chimera, every truth we speak has a $ in front of it.

Chimera’s website lists four federal bailouts. That is an impressive record. Tell us about these.

John P. Lunder IV: I can’t give you specifics, because we were required to sign some documents that kept us from giving any details about amounts, agencies, and so on. But I can tell you this: We never let a crisis go to waste. A great executive and public affairs team knows what to do to get the job done. Taxpayers should be proud to have rescued so many great Chimera companies. Every time America rescued Chimera, they rescued themselves.

]]>http://www.forbes.com/sites/artcarden/2014/02/14/are-you-konnected-an-exclusive-interview-with-chimera-ceo-john-p-lunder-iv/feed/1It’s Time for Governments to Get Over the Edifice Complexhttp://www.forbes.com/sites/artcarden/2014/01/29/its-time-for-governments-to-get-over-the-edifice-complex/
http://www.forbes.com/sites/artcarden/2014/01/29/its-time-for-governments-to-get-over-the-edifice-complex/#commentsThu, 30 Jan 2014 00:50:00 +0000http://blogs.forbes.com/artcarden/?p=1886On Sunday, the Super Bowl will take place in a glittering, state-of-the-art football stadium in New Jersey. Undoubtedly, municipal development officials will look wistfully (and covetously) at the seeming economic bonanza, sigh, and mutter “if only.” Wouldn’t it be great if your city or mine build a brand-new stadium, lured a Big League team, and was selected to host an All Star Game or a Super Bowl or (perish the thought!) the Olympics?

Surprisingly, the answer is “probably not.” Governments have an apparent obsession with Big Shiny Projects like arenas, stadiums, convention centers, museums, and other projects; this fascination has been called “the Edifice Complex.” These projects are often sold to voters with promises of new jobs and greater prosperity: Catherine Rampell reports, for example, that officials are touting an “economic impact” of $550-$600 million from hosting the Super Bowl. These promises, like other glittering promises of new prosperity from stadiums and big events, are in turn based on economic impact studies that make questionable and unrealistic (to put it mildly) assumptions about multiplier effects.

At first glance, it looks like these projects are economic winners. People have to be paid to build an arena, and people attending events at the arena usually spend money at area restaurants and hotels. What’s not to love?

As Dennis Coates and Brad Humphreys explained in a 2008 summary of the literature on the economics of stadiums and big-time sports that appeared in Econ Journal Watch, however, a lot of the fun that happens in and around a stadium is a substitute for fun that would happen elsewhere in town. Birmingham, Alabama, where I live, has been talking about building a domed stadium for at least a decade and a half because it would stimulate the local economy. Most of the spending at or around the stadium, however, would simply be spending that would otherwise happen in Five Points, Avondale, or another part of town.

The same logic applies even to out-of-town visitors. This past summer, I went to a Padres game during a trip to San Diego. It looks like they’re stimulating the local economy, but had the Padres not been there, I would have done something else.

Sports can also change when people who would otherwise visit a city plan their trips. I visit Atlanta fairly frequently, and last summer I decided to avoid the city on a night when the Braves had a home game because the hotel I wanted was more expensive. I went later in the week. Others who had business to do in Atlanta might have decided to schedule meetings to coincide with Braves games, Falcons games, or other big events.

It isn’t just stadiums. According to a January 21 Carolina Journal article, the NASCAR Hall of Fame in Charlotte “provides a strong example of what other leaders should avoid.” The Charlotte Regional Visitors Authority “projected a whopping 800,000 annual visitors,” which is more than the Baseball, Football, and Basketball Halls of Fame get combined. With annual visitors below 200,000, Charlotte’s citizens now have higher hotel taxes and a money-losing venture on their hands.

If we’re going to make public policy about climate change based on an appeal to a consensus among experts, then the same logic should inform our decisions about subsidizing arenas, highways, museums, and other projects. As Coates and Humphreys note, the research-backed consensus among economists is that these projects like stadiums “cannot be justified on the grounds of local economic development, income growth or job creation, those arguments most frequently used by subsidy advocates.” If we really want more prosperous cities, our leaders need to get over the Edifice Complex.

]]>http://www.forbes.com/sites/artcarden/2014/01/29/its-time-for-governments-to-get-over-the-edifice-complex/feed/0Colorado and Washington Blazed a Marijuana Legalization Trail: Should Others Follow?http://www.forbes.com/sites/artcarden/2014/01/20/colorado-and-washington-blazed-a-marijuana-legalization-trail-should-others-follow/
http://www.forbes.com/sites/artcarden/2014/01/20/colorado-and-washington-blazed-a-marijuana-legalization-trail-should-others-follow/#commentsMon, 20 Jan 2014 19:10:00 +0000http://blogs.forbes.com/artcarden/?p=1879A lot of people on Reddit have pointed out that the term “Super Bowl” might mean something different this year as the Lombardi Trophy is guaranteed to go to a team from a state that legalized marijuana. Should other states follow suit? Absolutely: the economist Jeffrey Miron refers to drug prohibition as “one of [the US’s] most disastrous policy experiments,” and it is clear that we would live in a safer, freer, and more prosperous world if we ended drug prohibition. In large part, it is because this would also eliminate a lot of the violence associated with the drug trade.

In a recent New Yorker interview, President Obama claimed that he doesn’t think marijuana “is more dangerous than alcohol” and that “it’s important for [the legalization of marijuana in Colorado and Washington] to go forward” because of the fact that only a small percentage of the people who break laws against drug use actually get punished. I can’t say much about the science behind people’s claims about the effects of marijuana, but from a public policy standpoint the case for legalization is overwhelming.

As I’ve written before, the War on Drugs is literally a textbook example of a public policy with negative unintended consequences. In plain language, people like to get high, and they aren’t that sensitive to changes in the price of getting high. Reducing the supply of drugs doesn’t do much to people’s drug consumption, and it can actually increase revenues for drug gangs.

Furthermore, since drugs are illegal drug-related disputes get settled with street violence rather than through the court system. Entire neighborhoods are war zones because of drug prohibition, and we are filling America’s prisons with non-violent drug offenders. Our prisons are filled with violent drug offenders, too, but again, almost all of the violence surrounding the drug trade is due to the fact that drugs are illegal and not due to the drugs per se.

The case for drug legalization is not based on speculation, and it is hardly new. Almost twenty years ago, economists Jeffrey A. Miron and Jeffrey Zwiebel summarized “The Economic Case Against Drug Prohibition” in the Journal of Economic Perspectives. The economist Mark Thornton’s book The Economics of Prohibition (the link is to a $0 ungated PDF) was published in 1991. In 2008, England’s Institute of Economic Affairs published a volume titled Prohibitions (link is also to a $0 ungated PDF) that considers the unintended consequences of prohibitions on drugs, pornography, firearms, boxing, and other goods and services.

The evidence is pretty compelling: if someone is eating, drinking, smoking, or shooting something you don’t like, one of the worst things you can do is pass a law against it. In the early twentieth century, we learned from the disaster that was alcohol prohibition. Shouldn’t we also learn from the disaster that has been prohibition of other drugs in the late twentieth and early twenty-first centuries?

Few things are as frustrating in real time as the search for The Right One. Even once you find her and have been married for over a decade, few things are as prolific “what was I thinking?!” sources as the things you said and did during that search. It’s costly. It’s frustrating. You’ll probably end up with an emotional scar or two.

Mr. Backus and others like him should cheer up. If you’re alone on New Year’s Eve, then you can probably fix that with online dating. After we did a couple of infographics about Bayes’ Theorem, the NSA, and baseball, my friends at NowSourcing and I started kicking around ideas for other applications of statistics to life’s problems.

And which problem looms largest in many minds? Finding Mr. or Miss Right.

While there used to be a stigma associated with online dating, that stigma is going away rapidly. Algorithms used by online dating services like eHarmony, Match.com, and OkCupid eliminate a lot of the noise from navigating the dating scene and link you with people who already share your interests.

To illustrate, the people from NowSourcing found a sponsor (www.FreeDating.co.uk) and made this infographic for your viewing pleasure.

You don’t have to be Forever Alone. You don’t have to kiss your beer at midnight. Your friends who tell you that there are “plenty of fish in the sea” are right. The Right One (at least, A Right One) is out there. And I’m guessing he or she will be easier to talk to than an alien.